Is Big Law Finally Ready to Innovate?
By Jemma Parsons
Disruptive new Australian legal startups have successfully captured innovation news headlines in recent years. Startups like Law Path, Legal Vision and Hive Legal were swift to act in creating innovative business models that offer solutions to long-standing client complaints about legal services. They offer value-based and fixed pricing; unbundled services; and leading technologies to enable remote working and digital interfaces for client communication and reporting.
The flurry of new legal service startups is responding to the market demand for lean, transparent, accessible and unbundled legal services.
Law Path’s tagline We’ve Made Legal Easy makes that objective clear. With one click a prospective customer can request a free quote, download a legal document template, start a free live chat with a legal consultant or access a national directory of specialist lawyers.
The ‘New Law’ startups are driving out inefficiencies in the business models of traditional law firms and are gaining market traction in the low end, SME and commodity space.
But they will continue to move up market. This is typical of the trajectory of disruptive innovation - it hits the lower and middle segments of the market first before improving offerings and moving towards the higher end of the market.
But what’s happening at the big end of law town, a.k.a ‘Big Law’? Despite sensationalist headlines like that of The New Republic who in 2013 heralded the ‘The End of Big Law’, until recently big firms have appeared relatively relaxed about disruptive movements in ‘New Law’ and therefore slow to respond to the threat of disruption.
Commentators are divided on the subject of disruption in Big Law.
Some conclude that big corporate law firms are staring down the barrel of a painful transition as firms respond to a fundamental market shift: the shift from a supply driven to demand driven market, where the market values of efficiency, quality and seamless customer experience trump that of prestige and reputation. They point to trends like the incoming millennial workforce who value flexibility, digital efficiency and ethics over the corporate ladder climb in a big brand name. They point to the reduced corporate spend on external legal advice in favour of growing more expert internal legal counsel as a method for exerting downward pressure on overall legal spend. Others argue Big Law is relatively safe from full blown disruption, protected by the information asymmetry between clients and lawyers and the high barriers to entering legal practice.
But it appears an awakening in Big Law is here.
The Financial Times last week announced the winners of the 2016 European Innovative Lawyer Awards. The overall winner was Linklaters, a prestigious multinational law firm headquartered in London. There were nineteen discreet award categories recognising firms' innovation from technology and digitization to innovation in business development, client collaboration and resourcing. Here are seven notable mentions:
Established nine years ago by US environmental lawyer James Thornton, ClientEarth is Europe’s first law firm set up to defend the public interest in the environment. Formed as a charity and independently funded, it now has 100 staff, who use the law as a strategic tool to protect the environment and human health. Focusing on different areas such as biodiversity, forestry, company and financial law, the firm aims to change legislation and policies and influence how businesses report their impact on climate. An important part of the firm’s work includes making sure that environmental laws are implemented in the spirit of how they were written.
Baker & McKenzie
Created a new European insurance-backed structure for PrimeRevenue to allow investors to fund small companies by investing in their suppliers’ payment obligations (invoices).
King Wood Mallesons
In a highly unusual project, the firm was asked to create the legal framework for a disruptive economic innovation based on a new virtual currency. The ECO Capacity Exchange enables companies to trade their excess capacity, in the form of available but unused goods and services. Transactions rely on the Enterprise-backed Credit Obligation (ECO), a unit of exchange supported by investment-grade multinational companies and based on traditional currencies. The aim is to circumvent volatile money created by governments and stimulate new sources of capacity-backed demand. The lawyers had to create a mechanism for facilitating barter-like transactions using a new concept of money.
D2 Legal Technology
One of the first consulting firms to combine technology and the law to digitise legal documents for major financial institutions.
The firm reorganised itself away from legal practice areas into sales and delivery teams where success is measured by client satisfaction rather than fees and hours.
Kennedy Van der Laan
The Netherlands-based firm has created an online platform through which all work and communications are conducted for its network of member firms in 22 jurisdictions so that its clients, for example Nike, experience them as a single law firm.
Cadwalader, Wickersham & Taft
The firm devised an affordable way for smaller companies to access securitisation techniques. Structured finance products are usually the preserve of bigger businesses and incur large legal fees. However, the firm has invented the documentation for a small financing product which could scale up to attract institutional investors while keeping legal costs low. Facilitating small and medium- sized businesses’ access to alternative financing means the firm can retain them as clients as they grow. As well as benefiting the firm, this approach has acted as a stimulus to the alternative finance industry.
These leading examples in Big Law innovation signal a growing awareness in some of the worlds most traditional and established corporates of the imperative to adapt to changing market demands.
Leading law firms of today, like the preceding list, are those taking a proactive (rather than reactive) approach to adaptation – making internal adaptive changes before they are necessary by threat of competition and lost market share. Amidst the flourishing of lean, technology-driven alternatives to legal services capturing the lower end of the market, leading ‘Big Law’ firms of the future will be those whose adaptation efforts have included a refocusing of the internal lens towards authentically capturing the hearts and minds of consumers.
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